It's one of investing's biggest paradoxes. That is, buying and holding yields the best long-term returns, but most of the market's most compelling growth companies at any given time are capitalizing on trends that will eventually cool off.
Not all of them, though. Every now and then, a true "forever" growth prospect surfaces. When it does, your best bet is to act without overanalyzing your entry price. Ten years from now, you won't really care what you paid for a winner.
Here's a closer look at three great growth stocks you can buy today and plan on holding forever.
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Shopify
Even if you've never heard of Shopify (SHOP 2.25%), there's a good chance you've used it. Shopify helps businesses build and maintain an e-commerce presence. Skullcandy, David's Bridal, and shirt retailer Untuckit are just some of the familiar names that rely on this company's platform.
To fully appreciate Shopify's potential, you have to understand its roots. The company as we know it today was launched in 2006, mostly in response to a lack of easy-to-use online-selling alternatives to Amazon (AMZN 0.74%). Although the massive online shopping mall clearly had reach, it didn't allow its sellers to tell their brands' stories or cultivate a direct relationship with its customers. Shopify does both. Indeed, it's as much of a blogging and information-sharing platform as it is an e-commerce solution. And in a world where consumers increasingly crave authenticity and want to do business with a brand they can personally connect with, that's huge.
NASDAQ: SHOP
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Then there's the not-so-small matter of Amazon featuring competing products on every product listing's page; Shopify's users aren't forced to compete from within their very own website.
It's clearly been a hit, too. From 2015's top line of $205 million to what will be revenue of more than $11 billion this year en route to what's expected to be sales of more than $17 billion in 2027, something's clearly clicking between the brands using Shopify's technology and the consumers they're selling to.
This still only scratches the surface of the opportunity at hand, however. As much as the online shopping industry has grown, numbers from the U.S. Census Bureau indicate that e-commerce still only accounts for about 15% of the nation's total retail sales. While some of the other 85% will never move online, certainly much of this remainder will. Shopify stands ready to benefit from this shift.
Amazon
While Shopify is a formidable competitor to Amazon, it's not like Amazon is on the ropes here. It still serves its purpose as a place to get a good price on pretty much any consumer product you can think of. Last quarter's total product sales grew nearly 15% year over year, accelerating its growth pace. Meanwhile, its chief profit engine -- Amazon Web Services -- experienced top-line growth of 20% and operating profit growth of nearly 10%. Amazon clearly isn't doing anything wrong.
Its current growth rate isn't the chief reason to step into a stake while the stock's still priced where it was nearly a year ago, however. Neither is the fact that Straits Research expects the cloud computing market to grow at an average annual pace of nearly 19% through 2033 (although this certainly doesn't hurt the bullish argument). Rather, Amazon is a long-term buy because it's willing and able to evolve as merited.
The creation of Amazon Web Services is one such evolution, although a more recent one is just as promising. That's a rethinking of Amazon.com as an advertising platform as well as a sales platform. Over the course of the past four quarters, Amazon's collected more than $64 million worth of high-margin ad revenue from its sellers, up nearly 20% from the year-earlier comparison. This growth rate is likely to slow down from here, as the retail media advertising market matures. But given its history of experimentation and successful innovation, there's a new profit center in Amazon's future that no one's even imagined yet.
Netflix
Last but not least, add Netflix (NFLX +0.74%) to your list of growth stocks to buy and hold forever.
There's certainly no shortage of drama here. As of late last week, it looked like Netflix was the winning bidder for Warner Bros. Discovery's studios and streaming business. Then Paramount Skydance stepped up early this week, taking its offer for the entirety of Warner directly to WBD shareholders. Of course, there's also the prospect of the Department of Justice's antitrust arm blocking either or both deals.
NASDAQ: NFLX
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The thing is, it really doesn't matter if the company ends up with most of Warner Bros. Discovery's non-TV assets or not. They're certainly a nice-to-have, but hardly a must-have. Netflix is doing just fine as it is on its own. Indeed, it arguably could be better off remaining on its own, continuing to build its brand and business without trying to integrate a different one.
That's what the anecdotal evidence suggests, anyway.
Simply put, Netflix dominates the streaming industry it largely established. Data from entertainment media research outfit Hub indicates that Netflix is the first stop for 19% of U.S. television watchers when they turn on their TV. That doesn't sound like much, until you learn that the entirety of live/cable television is only the default option for 39% of all television viewers. At the other end of the spectrum, the next-nearest subscription-based video entertainment source is Walt Disney's Hulu, but only 5% of watchers browse its offerings first.
Separately but similarly, Pew Research reports Netflix is the most-watched streaming service in the United States, with 72% of all streaming users subscribed to this particular service. The data confirms that while most American households utilize more than one streaming service (with an average of around four), Netflix is the one that's most commonly paid for. And being the one that's most commonly paid for allows it to offer more content, which of course keeps paying customers on board. Ditto for its overseas operations, where most of the company's customers are found.
Netflix may or may not nab Warner right now. As the industry continues to consolidate, though, it will have first crack at any other acquisition prospects. After all, being the industry's first and biggest player, it's the name other streamers want to partner with.
